JKX Oil & Gas plc Annual Report 201119At a glance01-17Board statements18-23Operational review24-36Financial review37-47CSR review48-61Directors' reports62-83Financial statements84-136All Injury Frequency Rate (AIFR)Earnings per share (basic, cents)09101107080910110.1734.370.6247.561.5054.2347.9749.8573%28%up of our LPG facility at mid-year in Poltava have both contributed to a record Company revenue generation of $236.9m for the period. Delays on completion of our large Russian project have pushed initiation of gas sales into this year, and this together with our cost of borrowings, has continued to put pressure on our cash position. This is forecast to ameliorate during the second half of 2012 with the reduction of capital spend in Russia and inflow of Russian production revenues. Progress has been made in our exploration programme with a successful well on our new Ukrainian acreage and a gas discovery in Hungary. We have also initiated a review of available exploration prospects in Russia in the vicinity of our Koshekhablskoye licence.We have completed a reserve review of our licence portfolio as of 31 December 2011, and I am pleased to announce that, after a total 2011 production of 3.3 MMboe, we have increased our 2P reserves to 90.7 MMboe (a reserves replacement ratio of 2.7).Your BoardThis year has seen a number of changes in the composition of the Board. I noted in my Interim Statement that your Board supports the longer term aspirations of Lord Davies's report on gender diversity on appointment of directors to boards. I would have been indeed prescient if I had been aware that we were shortly to appoint a woman as Finance Director who met our criteria for ".the highest quality people with the most appropriate experience for the requirements of the business, be they men or women." Cynthia Dubin joined the Company as Finance Director in November and brings with her a wide experience of the oil and gas and energy sectors. Cynthia has a strong project finance and banking background and is an invaluable addition to the management team. November also saw Alastair Ferguson join the Board as a Non-Executive Director. Alastair has held a wide range of senior positions with BP during his 33 years in the oil and gas industry, culminating in an eight year assignment in Moscow leading the gas and power business of TNK-BP in Russia and Ukraine. Alastair's extensive knowledge of the specific area in which we are working will be of great benefit to the Company. Bruce Burrows retired as Finance Director at the end of September and I thank him and wish him well for the future.Michel-Marc Delcommune retired from the Board in December and I thank him on behalf of the Board and all staff and shareholders for his contribution to the Company over the last three and a half years. Lord Oxford has stepped down as Senior Independent Director (SID), but I am delighted that he has agreed to remain as a member of the Board. Nigel Moore, the Chairman of the Audit Committee, has taken over the role of SID, effective 1 November 2011. DividendIn my Interim Statement, I highlighted the impact on available cash flow of the combination of a significant increase in taxation in Ukraine in 2011, the delay in start-up of the Russian project and the attendant increased project costs. This led to our decision to forgo an interim dividend for 2011. These pressures continue. Your Board recognises that we will need the rest of this year to pay down >>
20Chairman's statement continuedour existing short-term borrowings, reshape the balance sheet and provide a greater element of liquidity to our operations going forward. Consequently, the Board is not recommending any final dividend is paid for 2011.Outlook The critical issue for your Company in the coming second quarter of 2012 is to complete all aspects of our Russian project to enable the Company to sell its gas at plant capacity. Further work is also required on well 25 to bring it into production.Our financial resources over the next 6 months will be stretched and it may be necessary to delay some drilling projects and the frac in Ukraine until later in the year. Ukraine remains the engine of the Group and we will continue our endeavours to broaden our licence position there.Finally, I wish to thank all our shareholders for their continuing support of the Company and all staff for their sterling work in what has been a demanding year.